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Innovation and Firm Performance: Evidence from Portfolio-Based Asset Pricing and Risk-Adjusted Returns Across Regions

Author

Listed:
  • Kolade David Oke

    (CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes)

  • Radu Burlacu

    (CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes)

  • Isabelle Girerd-Potin

    (CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes, UGA - Université Grenoble Alpes, Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes)

  • Gilles Sanfilippo

Abstract

This paper examines whether firm-level patent activity and citation impact predict superior stock performance in U.S. and European markets. Using portfolios sorted by innovation intensity, we find a consistent but non-linear innovation premium that follows an Inverted-U pattern, peaking before the extremely innovative portfolio. While the U.S. acts as an efficiency machine that rewards patent outputs and penalizes unproductive R&D, Europe behaves as a signalling regime where R&D spending serves as a legitimacy signal for mature incumbents. The premium is subject to rapid time decay, with abnormal returns largely dissipating within 24 months after portfolio formation. Statistical tests reject a uniform global innovation factor, revealing that the innovation premium is not a universal constant but is contingent on regional market characteristics.

Suggested Citation

  • Kolade David Oke & Radu Burlacu & Isabelle Girerd-Potin & Gilles Sanfilippo, 2026. "Innovation and Firm Performance: Evidence from Portfolio-Based Asset Pricing and Risk-Adjusted Returns Across Regions," Post-Print hal-05770346, HAL.
    • Handle: RePEc:hal:journl:hal-05770346
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